|
| |
EDITORIAL
We proudly announce that Energy Exchange and Heller Redo Barroso & Associates have formed a partnership for publishing a monthly Newsletter focused on the Oil and Gas, Shipping, the Offshore Petroleum Industry and Energy. This is the third Newsletter issued by Heller Redo Barroso & Associates, but the first in association with EnergyExchange.
We hope to provide updated and accurate in-depth coverage of the current major issues regarding these industries. The newsletter is business-oriented and focused on giving our readers a heads-up as to business opportunities and critical developments in the marketplace.
The Newsletter, articles, and presentations will be available at the homepage of HRB and Energy Exchange and also at the Newsletter dedicated webpage.
The Energy Exchange Ltd is an independent, conference organiser and information provider to the global oil and gas and energy sectors. The company was formed in 1997, and has offices in Central London and Cheltenham in the UK. Energy Exchange operates a team of independent senior consultants basead across Europe, Asia, Russia and the Middle East.
The Energy Exchange Ltd has achieved worldwide recognition within the upstream Oil and Gas and alternative energy sectors, through the organization of its high level, strategic conferences. Strong and long standing relationships with governments and major Oil and Gas producers worldwide result in audiences of key decision makers from industry and government.
Heller Redo Barroso & Associates is a boutique law firm specialized in Oil & Gas, Shipping, the Offshore Petroleum Industry and Energy. The core business of the firm is assisting foreign contractors and vendors, especially newcomers into the Brazilian marketplace, in tenders and direct negotiations and various projects with Petrobras from refining and petrochemicals to upstream, from analysis of preliminary project documents and assessment of liability through mitigation of risk exposure and successful closing of complex business transactions.
The Firm’s practice is particularly reputable for its handling of projects involving the operation, purchase and sale, construction, conversion, upgrade and chartering (bareboat, time, and voyage charters) of ships, rigs and offshore units such as Semi-Submersibles, Drillships, FPSO’s Jack-Up’s, Spars, TLP’s, Pipe-layers, ROVs, Floatels, FSO’s, as well as support vessels (PSV’s, Line Handlers, AHTS), seismic vessels, and coastal-trade and long-haul Bulk-Carriers, Chemical and Oil-Tankers, LNG vessels (including FSRV’s and SRV’s), and various other vessels.
Our very best regards,
|
Heller Redo Barroso
Founding Partner
Heller Redo Barroso & Associates |
Igor Tavares
General Manager for Latin America
The Energy Exchange |
|
 |
| CRCC – Companies Already Started to Experience Problems Due to Lack of CRCC Enrollment with Petrobras |
The CRCC (“Certificado de Registro no Cadastro Corporativo”) is the registry required for companies willing to be included in PETROBRAS’ vendor list, in which the supplier provides information about the company and specifies the products to be offered to Petrobras. Basead on the information comprised in the CRCC, PETROBRAS invites companies to participate in tenders or direct purchase negotiation of products.
In a few months, with very few exceptions, companies without CRCC enrollment will be prevented from selling or rendering services to PETROBRAS. As a matter of fact, many companies had already come to our Firm seeking advice once they were disqualified in Petrobras tenders due to the lack of CRCC registry.
Nevertheless, some of our clients, who already had CRCC enrollment, experienced problems in the renewal of their contracts just because they failed to timely update their CRCC or failed to include a particular product.
We dare to say that the CRCC enrollment is close to become a mandatory registry in Petrobras sales. As an example, other clients of our Firm, which are Petrobras' suppliers for more than 30 years, are now being pressed on a daily basis by Petrobras managers to complete their CRCC registration.
Companies are required to submit literally more than a hundred documents regarding in-depth detail of company's legal and financing standing, facilities, manufacturing processes, personnel, technical specifications of equipment, etc.
Due to the complexity of this procedure, the CRCC enrollment usually takes a long time to be concluded. However, owing to the expertise developed over the years, OUR COMPANY IS NOW IN A POSITION TO GET CRCC WITHIN 90-120 DAYS FOLLOWING THE FILING OF CRCC APPLICATION FORM and the basic documentation required. Other firms will likely take one year and a half or even two years to conclude this process.
The CRCC registration service is rendered by a multidisciplinary group composed by lawyers, engineers and accounting people specialized in this kind of registration, most of them former Petrobras engineers who worked at the CRCC division.
Back
|
|
| M&A Spree in Petrochemicals Continues |
The M&A-spree that is revolutionizing the petrochemicals sector in Brazil (worldwide, we dare say) continues. We dealt with this subject in our two first newsletters (downloadable from www.hrblaw.com.br), and it’s far from over.
Braskem, after snapping up Quattor and thus becoming the largest thermal plastic resin manufacturer in the Americas (26 petrochemical plants in operation), keeps on expanding both domestically and internationally at fevered pace. It’s poised to become a super-giant in the petrochemicals field worldwide, and they want to move into the top 5 rank. With this in mind, the company has just acquired North-American Sunoco Chemicals, with capacity to produce 950,000 tons per year of polypropylene.
Back |
|
| Upcoming New Articles – CRCC Enrollment and Upcoming Tenders at Petrobras, and Strategic Considerations Regarding the International Assets of Petrobras |
| We published an article on this topic in April’s newsletter. Since this edition is being circulated to a much broader audience (due to HRB’s partnership with EnergyExchange), we regret making this newsletter so long, but we felt compelled for the benefit of our new readers we believed it was worth mentioning our articles on the Brazilian offshore petroleum industry and on local content requirements, which can be downloaded from the following webpage: |
Worldwide Financier Article – Brazilian Petroleum Offshore Industry: http://www.hrblaw.com.br/articles/financier_worldwide/index.html
TB Petroleum – Local Content Requirements: http://www.hrblaw.com.br/articles/local_content/index.html
To compensate, there are no new articles in this edition!
Back |
|
| Coke Processing at Suape |
In this edition, we report that Oxbow Carbon Minerals LLC has signed two agreements with Petrobras for the construction of a coke processing unit in Porto de Suape, Pernambuco. The oil sub-product will be produced at the Abreu e Lima refinery (RAL).
Petrobras has also contracted with the Techint / Andrade Gutierrez consortium to construct a delayed coking unit at the Rio de Janeiro Petrochemical Complex (Comperj).
No doubt the subject of “coke” will heat up during the upcoming months in Brazil (believe us). So we have now added to our repertoire a specific presentation on the coke industry in Brazil and the potential business opportunities.
This Powerpoint presentation is readily available for downloading from the HRB webpage.
Back
|
|
| New Shipyards Mushrooming |
In our March edition we said that ten new quite sizable yards are being negotiated to be built over the next few years in Brazil. At the time we said that all Korean majors either had already established their partnerships or were about to do so. Not surprisingly, they foresee a windfall of upcoming tenders for the construction of new offshore units for Petrobras, as well as tankers and bulk carriers for Transpetro and Petrobras’ Downstream Division (the “EBN” program).
We also mentioned that states like Bahia, Ceará, Rio Grande do Sul, and especially Pernambuco are putting out loads of incentives for these yards to choose them for their locations.
In our continuing coverage of this matter, hot off the press we report the construction of three new yards:
- Korean-owned STX Europe announced the construction of a new shipyard in Porto de Suape, Pernambuco. The industrial plant will require investment of some R$630 million (US$352 million) and is expected to be completed in 2013. The unit will be built on a 100-hectare plot of land.
- Recently, STX signed a partnership deal with PJMR
– which is already a partner in the Atlântico Sul and STX Brasil shipyards
– for the construction of the Promar Ceará shipyard at Porto de Mucuripe, in Fortaleza (Ceará). This yard will look to build offshore vessels.
- Portuguese-owned MPG Shipyard announced construction of a base projects in Pernambuco for offshore modules and equipment, along with wind power. The company expects to invest R$252 million (US$141 million) in the project, to be built on 33.5-hectare plot.
Also, the first ship in the Transpetro Fleet Modernization and Expansion Program (Promef) was completed by Atlântico Sul Shipyard (EAS).
The ship – a Suezmax type – is part of a package of orders from Transpetro to EAS. Currently, the shipyard has a portfolio of 22 oil ships as well as the hull for P- 55.
As we see it, the skeptics should revisit their stances: the construction of sophisticated yards to meet Petrobras demand is already materializing, and much sooner than even most optimistic expected. This is no wonder: on top of the windfall of Petrobras and Transpetro orders, hoast of coastal trade companies not related to Petrobras will likely follow suit shortly as their fleets are old and unsuitable for new contracts.
We know that at this moment a significant number of long-term (some as long as 25 years) time-charters are being negotiated, especially for bulk and chemicals carriage. Customers will accept nothing but new vessels. Some vessels in the current fleets do not even meet both domestic and international current regulatory requirements. We sincerely can’t fathom how these vessels are still in operation. ANTAQ should be more attentive to this matter, as may be being compromised the safety of shipping along the Brazilian coast.
And, as you will see later in this newsletter, orders are popping out of the oven for these new yards:
- Eight gas tankers to be built by the Promar Ceará shipyard will cost R$940 million (US$536 million)
- Petrobras will tender 20 new vessels in the second phase of the “EBN” program, which involves the construction of gas tankers, Panamax vessels, and bulk carriers
- Transpetro and the BNDES development bank signed a R$856 million (US$481 million) financing contract with the Eisa shipyard to construct four Panamax tankers purchased during the first stage of the Fleet Modernization and Expansion Program (Promef).
Back
|
|
| Watch Out for the Chinese! |
Petrobras has executed a memorandum of understanding with the Chinese oil company Sinopec and the Chinese EximBank (China Development Bank). The agreement anticipates the joint cooperation in several areas of the oil industry, most notably in exploration and production, refining, and petrochemicals.
In our opinion, many world-class companies are sitting on the sidelines while the Chinese are marching in big time to Brazil. If they do here as they did in Africa, everyone better start learning Mandarin…
Back |
|
| New Antaq Regulation – Fundamental Change in Petrobras’ and Other Operator’s Charter Contracts |
This matter, reported last month, continues unabated.
This new regulation established a model of Time Charter Party to be employed in Brazilian market, banning the old model of splitting contracts/price (90% bareboat charter + 10% operation and services agreement). Even if this regulation is not yet published (thus not being enforceable yet), the agents of the market including Petrobras have already started to adapt and adjust their contracts with respect to ANTAQ`s viewpoint.
The direct effects of this are: (i) Renegotiation of contracts
(ii) Surveillance by ANTAQ regarding charter authorization (when needed)
(iii) Debate over the extension to the new unified time-charters of the REPETRO special customs duties suspension regime. The Brazilian Internal Revenue Service in its first reading of the situation, decided in some concrete cases that the new time-charters should be taxed as services contracts not eligible to REPETRO. This means taxation in the neighborhood of 60% for all foreign vessels chartered by Petrobras, let alone the application of municipal taxes worth up to 5% in some municipalities.
The matter is serious. But in our opinion it won’t adversely affect rig owners since Petrobras contracts provide for the upward adjustment of daily rates in case of increase in tax burden. Therefore, in the new contracts, these taxes will be factored into bids for all competitors, thus it will become a cash-neutral issue for most contractors. In fact, Petrobras is the one likely to get burned. Taking into consideration the role of the company in Brazil and world-wide, we sincerely believe that the company will very shortly come up with an arrangement with the IRS , whereby REPETRO will continue to be applied to charter of foreign rigs and support vessels.
The matter has political ramifications. Naturally, municipalities and the IRS wish to boost their tax collections and not miss the boat from the new oil bonanza. Despite this, we still believe that Petrobras’ interests will prevail. Noone wants additional tax burden to even partially jeopardize the country’s pre-salt exploration campaign.
The IRS and municipalities should know better: if they tax rigs big time, there will be fewer rigs, and less activity in the oil and gas sector. Over the long-haul, the amount of taxes that could be directly and indirectly generated by a more intense activity in the industry will undoubtedly prove much higher than the customs duties and municipalities services taxes that are now being at issue.
It is also important to highlight that a strong precedent from STJ, Brazil’s highest court of justice for non-constitutional matters, certainly will apply to this case.
The decision is from end 2009 and establishes that charters (time-charters, bareboat charters, or voyage charters) cannot be taxed as services. This means that the 0,5%-5% municipality taxes, as well as withholding federal taxes worth 33% (grossed up from 25%) cannot be levied on revenue from these kinds of contracts. Since the decision encompasses time-charter, the taxation burden on the Petrobras charters may even be reduced if this precedent is upkept by the court, as today 10% of the charter is allocated under a different services agreement and taxed.
Based on this court decision 100% of the contract value would be exempt from the taxes mentioned above.
We cannot assure that this decision will be up kept by other courts since it is not binding on them and also very recent, but the court award is very solid and well researched and we believe it will have a very strong influence in the Brazilian legal system.
The decision does not address the matter of customs duties, but, as we said, this is a matter that will soon be solved by Petrobras and the Brazilian IRS in view of REPETRO.
Finally, we remind the readers again that this initial confusion as to the new yet-to be published regulation will not adversely affect rig- and other MODU- and ship- owners over the long-haul.
We are more concerned with the companies catch in this window between the decision of Petrobras in changing the structure of the contracts in view of the upcoming regulation and the final arrangement that will certainly be reached by Petrobras and the Brazilian IRS with respect to this matter. We have a sort of gap or limbo where companies may suffer losses in view of the lack of definition of these issues. Several of our clients are already seeking our legal advice as to how to protect themselves. Back |
|
| Petrobras’ International Assets |
We have also posted on the HRB webpage a list of Petrobras’ International Assets, which may be of interest to foreign companies. For new readers who did not receive the first edition of HRB newsletter, this presentation is available for downloading from HRB webpage.
Back |
|
| Data Base for Executive Research |
Heller Redo Barroso & Associates is a boutique law firm specialized in oil & gas, shipping, and the offshore petroleum industry. The core business of the firm is assisting foreign contractors and vendors, especially newcomers into the Brazilian marketplace, in tenders and direct negotiations and various projects with Petrobras, from analysis of preliminary project documents and assessment of liability through mitigation of risk exposure and successful closing of complex business transactions.
The Firm is recognized for its concise and practical business-driven solutions-oriented advice, and is reputed for the engineer background and the familiarity of its lawyers with the commercial and technical aspects of the projects they handle, as well as international and local industry and Petrobras-specific practices that are of paramount importance when negotiating with that company.
The Firm is currently fully staffed and comfortable as to its short-term projections as to increase in demand for legal services. Notwithstanding, in view of the exponential growth of the market and an upward trend in the demand for legal service in our core areas of practice, the Firm is anticipating this market trend and already creating a data base of professionals that might join the firm in the near future.
We thus invite any interested party to send résumés to hrb@hrblaw.com.br, subject "DATABASE". These will be kept in strict confidentiallity.
The Firm's focus at this moment is on lawyers with the following profiles:
(i) Trainees, Junior Associates or Senior Associates experienced with Shipping and Offshore Petroleum industries;
(ii) Trainees, Junior Associates or Senior Associates experienced with Refining and Petrochemicals sector;
(iii) Trainee, Junior Associates or Senior Associates experienced with EPC contracts in Infrastructure and Industrial projects, including drafting, negotiation, management of claims, and arbitration;
(iv) Trainees, Junior Associates or Senior Associates experienced with Taxation in the Offshore Petroleum industry and in the Shipping industry;
The Firm requires that all interested lawyers must be fluent in English, including technical legal English and preferrably also the jargon of the oil and gas and offshore petroleum industry, and some knowdge of technical aspects of the industry, such as main players, types of vessels and equipments, main contracts, industry practices and any other background that would suit the profile of the Firm. Experience in dealing with Petrobras Contracts, most notably Charter and Services Contracts for rigs and other mobile offshore units will be highly appreciated.
Additionally, in view of on-going projects of the Firm, lawyers with fluency in Mandarin, Arabic, Russian, Norwegian, Japanese or Korean will enjoy a preferential status. Almost all of the Client's firms are international, and even though the standard language in day to day routine is English, some new clients are demanding fluency in the languages mentioned above as well.
The firm is also looking forward to hire administrative staff with at least intermediate-level English and experienced with administrative routine required for the management of law firms.
Back |
|
| Conclusion |
Worth repeating some conclusions from our very first newsletter:
(i) Brazil boasts a booming economy barely derailed by the worldwide financial meltdown
(ii) Brazil is now an investment grade country
(iii) Brazil blossoms among the BRICs
(iv) Brazil is clearly poised to become the huge next safe hub for the world’s smart money (in particular in the oil & gas industry)
Seems like a far-fetched promotion of our country’s wonders?
(did we mention that Brazil is the only oil & gas hot spot that is also one of the world’s most visited tourist destinations?)
Well…, come and see with your own eyes…
Back |
|
| Rio Pre-Salt Conference – June 7-9, 2010 |
As a final note, please download from our webpage the brochures for the upcoming seminar “Pre-Salt Brazil 2010”. This is likely to be the largest and most important seminar so far on opportunities in the Brazilian oil and gas industry, involving major issues regarding the exploitation of the pre-salt frontier.
Confirmed key speakers include:
- Márcio Zimmermann – Minister of Energy
- José Sérgio Gabrielli de Azevedo – CEO, Petrobras
- Sérgio Machado – CEO, TRANSPETRO
- Almir Barbassa – CFO, Petrobras
- Julio Bueno – State Secretary of Rio de Janeiro for Economic Development, Energy, Industry, and Services
- Key senators and other congressional representatives.
So, if you’re serious about competing in the Brazilian oil and gas marketplace, you simply can’t miss it. Brochures are available for download in both Portuguese and English on the our webpage.
Thanks for your interest in our newsletter. I hope you’ll enjoy reading it as much as we enjoy preparing this monthly industry update.
Our very best regards,
Heller Redo Barroso
Founding Partner - Heller Redo Barroso & Associates
&
Igor Tavares
General Manager for Latin America - The Energy Exchange
|
| |
| |
| |
|
